Maximising Customer Value in Pharmaceutical Wholesaler

5382 words (22 pages) Business Assignment

30th Apr 2020 Business Assignment Reference this

Tags: Business AssignmentsPharmaceuticals7PsWholesale

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Introduction

Within this assignment we will be examining the factors that can impact customer value from the perspective of a pharmaceutical wholesaler, based in Swansea – AAH Pharmaceuticals.

We will look at Customer Relationship Management via the 4p’s. and the relationship of each regarding the Organisation improvement recommendations will be identified and a strategic action plan via S.M.A.R.T will be produced as a result.

We will also be looking at Quality management systems used within the same organisation, with focus on Kaizen 5S, LEAN 6 Sigma and DMAIC. And how the organisation uses these QMS systems in order to try and maximise customer satisfaction through refining of process and culture from within

Section 1 – Critically analyse the factors that impact on your organisations ability to maximise customer value.

AAH Pharmaceuticals, the warehouse and distribution centre of which this assignment will focus on, is part of the McKesson uk Group, McKesson Europe is based in 13 different countries, serving well over 2 million customers.  McKesson Europe also service over 2300 owned pharmacies, and in the uk, McKesson AAH has the largest community pharmacracy network in the country, employing approximately 21,000 staff in the UK.  Delivering over 15 million items per week, to over 14,000 pharmacies, AAH is the largest pharmaceutical wholesaler in the uk.

Being able to provide an excellent, reliable and quality service for internal and external customers is a key factor in sustained growth of reputation of both the organisation and individual departments held within.  Customers will always choose a service, or a product based on which will give them the best value for money.

It has been suggested that there are two main definitions of customer satisfaction:

Transaction Specific Experience – where customer satisfaction is gauged post event and judged by a perceived quality of the purchase occasion.

Cumulative Experience – where a customer has a perceived satisfaction of a product or service gained over a period. (Anderson et al. 1994).

As a pharmaceutical wholesaler, it becomes incredibly important to cover both areas of possible satisfaction whilst simultaneously protecting against customer dissatisfaction.  Ensuring that our customers’ expectations, including perceived quality expectation is met, and that there is an overall value for money (Fornell et al. 1996).  Focus on good customer satisfaction isn’t just limited to wholesale, it has become essential business practice throughout all kinds of industry. (Szymanski & Henard, 2014).

In the pharmaceutical wholesale sector that this assignment will be based on, Total Quality Management is paramount. By  improving organisational performance and effectiveness they strive toward customer satisfaction.  In order to do this, they must firstly focus on the following :-

  • Understand Customer Expectations
  • Maintain Excellent Two-Way Communication
  • Build on Reputation, perceived organisational image
  • Ensure Quality of both product and process
  • Maintain agreed service levels
  • Maintain set Standards
  • Offer adequate rewards and incentives.

AAH Pharmaceuticals use several established methods to improve on customer satisfaction, a key one for the organisation, given its market is the use of ‘The Marketing Mix’ or as its also known, “The 4 P’s” has become one of the most popular methods for marketing, this is supported by intensive efforts in customer relationship management (CRM).  CRM is an approach adopted by the organisation in order build on relationships with their clients and potential clients.  Mckesson uses its advanced IT ordering system, placed free of charge in every client’s workplace to gather data and subsequent information, with the view of analyse each customers history to improve business relationships and offer specifically targeted deals and incentives.  Ultimately this leads to increased satisfaction on the customers side and increased profits for the organisation.

Product – The Organisation offers a wide range of products and services. Being a major source to all levels of healthcare, including dispensing doctors, Pharmacies, hospitals, nursing homes etc.

They supply products from all major brands, they offer patented items as well as a multitude of generic options.  A subsidiary of the company is Lloyds Pharmacy network, allowing AAH to place product directly into the marketplace for the end use.  The Lloyds Pharmacy team can also offer access to a range of other  healthcare services that includes screening for Type 2 Diabetes, Asthma Support, Pain Management, Blood Pressure Checks and a Stop Smoking Service.  These types of extra services can give an edge over other independent pharmacies.

Price – The organisation, via the use of its sophisticated IT infrastructure can identify trends and bulk purchase certain brands or generics and offer these savings back down the chain to its customers in order to help maintain ‘Value for money’ maintaining the focus on value for money can also have a positive effect on customer satisfaction.  Goodman (2009).  Goodman (2009) also postulated that a positive customer interaction is likely to lead to increased profitability due to the effect of ‘word of mouth’ to around 5 people.  He also stated that dissatisfaction would lead to the customer communicating bad experiences to an average of 10 others. Customers who are satisfied with a company’s service and interaction event will tell others about it – positive word-of-moth, just as dissatisfied customer also bad mouth the company to other. Goodman (2009) suggested that dissatisfied customers tell on average ten people about the company as against 5 people by satisfied customer.

Place – The Organisation around the third P, Place, revolve mainly regarding being able to deliver effectively, what is ordered and in a timely fashion.  The organisation offers twice a day delivery.  They are the only pharmaceutical supplier to offer this service.  A customer can also submit prescriptions which are picked and bagged, customer ready, to be handed to the patient. This prescription assembly solution (PAS) is only available from the organisation in this country so far. And is available for intensive and selective distribution

The Organisation also has 22 strategically placed distribution centres across the UK and Ireland, allowing excellent market coverage and outstanding transport logistics.  These factors allow the organisation to keep but also help to attract new customers. A difficult task in the current economic climate.

Promotion – a key component in the marketing strategy of the organisation. they promote end to end temperature control, from supplier to end user, they currently have the only fleet of delivery vans to have temperature control and printable temperature tickets to hand to the customer. These Pharma Vans have become a key promotional advantage. In line with the organisations company image, dress code, temp control, they also promote excellent customer services, specifically with the new supply model to the Hospitals in south wales, with each hospital having a dedicated customer service personel at the branch.  This has been promoted heavily and has seen a significant increase of over 15% in line through put in the last 3 months.

While the 4p’s, and all incarnations thereafter have been said to provide the tools required to implement and develop long term marketing strategies and improve short term tactical programmes. (Palmer, 2004) and McCarthy in 1964 described the 4p’s as a good way to transform marketing planning in to applied practice.

However, there are several who critique the use of the marketing mix, Rafiq and Ahmed (1995) suggested that there is a high degree of dissatisfaction with the 4Ps framework.  it has also been said that the 4p’s don’t take into consideration the customer. Hindering relationships and avoids the interaction. (Moller 2006), he also surmises that the theory lacks theoretical content, and is a basic tool used only to focus managers attention.

A valuable method used to bridge the gap that the basic  4p’s model show in relation to customer needs and expectations is Customer Relationship Management. Rakotobe-Joel, Thierry. describes the model’s intention “to sustain a higher level of customer satisfaction and loyalty, by preventing supplier switching of profitable customers through prioritization scheme while retaining at-risk customers”

AAH Pharmaceuticals and its owners Mckesson, believe that an excellent relationship with customer is of paramount importance.  It’s also something that is regularly monitored through satisfaction surveys, social events and open days etc, these are foundational process in maintaining customer numbers, there is evidence supporting that customer satisfactions leads to increased organisational profitability (Bei & Chiao, 2001). CRM can also show high levels of correlation between a satisfied customer and increased loyalty and retention. (Zeithaml et al., 1996).

Relationships and customer spend in via promotion etc and our services and SOP’s are also monitored and subject to continuous improvement techniques such as the PDCA loop or the Deming cycle, 5s, 6Sigma etc.  these techniques allow the organisation to develop performances and Identify areas to improve while specifically tailoring certain promotions to the most relevant customers (Zeithaml et al, 2009).

Conclusion

The organisations approach to application of the 4p’s management model is currently limited by the lack of interaction with their customers. There is so much to gain, customer knowledge can lead to innovative thinking due to their relative viewpoint (Mithas Et al. 2005).  It has also been proved that customer interaction and subsequent satisfaction can help  reduce  the amount of customer complaints received by the organisation, including higher customer loyalty and usage behaviour (Bolton 1998: Mithas Et al. 2005) in a world where it has become standard practice to use social media, email, texts etc.  It is my belief that talking to customers, face to face, and at worst via a voice to voice telephone call can limit noise in message transmission (Shannon and weaver 1949)

Therefor AAH Pharmaceuticals, despite offering excellent IT packages based around ordering platforms for the pharmaceutical supply chain, falls short in building strong lasting and more importantly, trusting relationships with its customers.

Recommendations

  1. Create and implement a customer satisfaction and focus on customer needs and expectations in three key sales areas
    1. Hospitals
    2. Independent Pharmacy
    3. Chain Pharmacy and Consortiums
  2. Establish stronger two-way communication processes between customer care, organisation field representatives and the end user / Customer.

3         Build even higher levels of reputation and perceived organisational image.

S Specific Who, what, when, where and why P.Harries to confirm Questionnaire and implementation dates PH 1/7/19
Invite Hospital, Independents and consortiums to view the new automation and discuss ways to improve service BJ 25/6/19
Review SOP’s with responsible persons MHRA PJ 1/8/19
M Measurable How can I tell that I have accomplished my goal Monitor sales targets. Kpi’s in relation to H.I.C MD
Discuss improvements with monthly meetings with heads of purchasing  All
Monitor C1 and C2 credit returns and report in weekly doc  BJ
A Achievable Can my plan of action relating to my final goal be accomplished Hold PDCA updates on Mondays at 9 through July / Aug MD June / Dec
Dedicated timelines to be monitored PJ Jul-18
Complete quarterly communication meetings J/D/M/
R Realistic Does each plan step lead to final goal resolution Completing tasks associated with dept. team building will increase dept. morale and unity.  Increasing quality of workplace satisfaction MD
 Yes
 Increased Morale and understanding
T Time Bound Each completed milestone to be achieved by the end of the time frame specified All activities to be monitored over 12-week period  MD
Team building exercises planned and budgeted  JF
In branch communication focus team to be created. Suggest PJ, MD, AA, JF, BJ, Shop steward, Goods in supervisor, transport supervisor and lead drivers  MDoyle

4         Maintain current levels of service with quality product

Section 2 – Critical understanding of your organisation’s quality processes and its effectiveness in meeting customer requirements.

Delivering a quality service is essential in todays working environment, in all organisations.  It is essential for growth and prosperity and developing a significant and effective strategy is vital (Parasuraman, Zeithaml & Berry 1990). Parasuraman et al. also stated that its our customers that are the sole judge of an organisations service quality, by comparing the service they expect, and the service they receive.

They then identified  5 key points in what they call the ‘Principal Dimensions’ used to judge a company’s service.

  1. Tangibles
  2. Reliability
  3. Responsiveness
  4. Assurance
  5. Empathy.

Whereas in the USA the Baldridge Award recognises organisational performances judged on

  1.   Leadership
  2.   Strategy
  3.   Customers
  4.   Measurement, analysis, and knowledge management
  5.   Workforce
  6.   Operations
  7.   Results

Understanding what customer want and being able to deliver on those needs is fundamentally what will make an organisation successful.

Understanding quality processes and the ability to constantly improve, in all areas of the organisations performances is considered essential by the whole management tier at branch level but also, and more importantly, by the Organisational structure.  Quality Management Systems are in place throughout. And the use of such systems as Kaizen 5s, LEAN 6Sigma, Value stream mapping, Deming’s 14 etc

Kaizen 5s. (Sort, set, shine, standardise and sustain)

For example, within the engineering department at the Swansea branch they have an annual 5s event, created to ensure that their internal customers’ needs are met. Without which the efficiency of the organisation being able to meet the external customer expectations is seriously compromised.

5s Working Example within the organisation

Sort – once a year they hold a red tag event, where tools and miscellaneous items that have appeared in the workshop, will need to be claimed and justified by an engineering team member.  Anything not claimed will be stored in an assigned area for exactly 1 calendar month before being removed completely.

Set – Remaining tools and equipment will be assigned a visual space.  This space is only to be used for that specific item/s.  for example, ghost boards for tools, areas marked on floor for generator, welder etc. Linbins are also instrumental for consumables etc.

Shine – once steps 1 and 2 are complete, the whole area is cleaned top to bottom, ensuring teams capability to function effectively and complete any planned preventative maintence.  This ensures the team capability to effectively service our internal customers.

Standardise – re-establish and clarify cleaning methods and schedules to maintain the new standard

Sustain – Engrave the need to maintain methods and cleanliness to the tem.  Enforce the methods

Maintinging workspace organisation and cleanliness is extremely important, especially in an engineering environment, Pascal Dennis (2002) stated that ‘a lack of workplace organization is increased hassle and chronically extended lead times.

LEAN 6 Sigma

When it comes to operational processes, the LEAN 6 Sigma approach is favoured by the organisation, and this is mainly due to the teamwork factor involved.  It relies heavily on a collaboration, a team effort.  Focussing its efforts on eliminating the ‘8 Wastes’ as listed below.  The 8 wastes allow an organisation to focus efforts on ‘Value added’ over ‘Non-Value Added’ processes.  I will give examples of each in relation to the organisation. (DOWNTIME) “waste can be defined as anything other than the minimum amount of equipment, materials, parts, space, and workers time, which are absolutely essential to add value to the product.” (Summers 2011)

  • Defects and the elimination of.  They  reduce errors in automation picking by the application of CMMS computerised maintenance management systems.  This is an electronic form of planned preventative maintenance.  The system allows us to monitor all automation, highlight repeat offenders and minimise faults within the system thanks to regular and timely maintenance.
  • Over-Production. Although not really an issue with the organisation, due to the type of business.  The organisation provides what is ordered by the end customer and does not directly manufacture.  Although directly comparable issues can arise when the ‘Buying Department’ takes advantage of a supplier sale and orders an excessive number of items based on low cost at that time.  However, historically the organisation has destroyed out of date stock due to poor sales.
  • Waiting. Time lost by the organisation where either one staff member must wait for another to complete a process before they can complete theirs.  This can also be said of whole departments.  In relation to the engineering department, there can often be waste created through waiting should a reactive maintenance issue come up, specifically with some of the larger dispensing machines at full production time.  If an A-frame goes into fault, this can essentially freeze production. Causing delivery drivers to have to wait for their item’s routes can then be directly affected and customers can be let down by unmet delivery schedules.
  • Non-Utilized Talent, also known as the waste of intellectual talent, this is where a staff member is being used in a position where their capability is wasted on a task that could be just as efficiently completed by a less experienced, or less qualified personel.  For example, a qualified electrical engineer being used to stack stock items on a shelf, instead of focussing in CMMS or TPM tasks
  • Transportation.  In order to limit transportation wastes within the organisation, we look at several factors.  Deliveries from the central hub are minimised into efficiently packed and scheduled loads, van routes and customer schedules are monitored closely, and bespoke software is used to regularly study delivery route volumes, and fuel expenditure in order to minimise both time and fuel costs. A secondary cost would also be wear and tear, servicing etc. all directly associated with poor and in efficient route planning.
  • Inventory.  Every physical item, whether a tool, a chair, shelving or more applicably in a distribution warehouse, a stock item, held within the warehouse, has a monetary value attached to it.  These items if in excess can represent hidden expenditure such as storage cost, transportation cost, rental charges etc.  in order to minimise non pharmaceutical stock item expenditure. Regular use of the 5s system is completed
  • Motion.  A key topic in the warehouse about operational efficiency.  In a warehouse which is mainly automated, and where over 8 thousand products are stores for picking and packing to the customers, perfecting product placement is extremely important. In automated sections, the most popular items stored in the automation are placed closest to the manned checked area.  And in the manual pick sections, the most popular items are stored closest to the operator / stock picker, where the decreasingly less popular items are stored ever further away.  Both actions reduce walking distances and free up resource.  They also help reduce shift run times and maintain accurate van departure times due to correct order availability.
  • Extra-Processing. Normally associated with over working items that have been made incorrectly or over polishing/ perfecting an item unnecessarily, as the finished article would be above the customers acceptable level.  In application to the AAH warehouse it would be manually checking too many orders, or individually wrapping segregated stock for customers etc.  this is above expectation and isn’t a ‘Value Added’ exercise.

The organisations approach to quality processes in order to meet customer requirements is met using multiple techniques and theories.  The whole 6 sigma / lean manufacturing approach which has become prevalent over the last ten years in the organisation is applied using another theory, or recognised management methodology. And that’s the application of another continuous improvement technique, known as DMAIC, or Define-Measure-Analyse-Improve-Control.

Define   – Define objectives, focus on strategic targets

Measure – Measure existing processes and systems in order to give reliable comparisons

Analise – Analyse current systems and develop improvements to narrow the gap between ‘Desired state’ and Current State’

Improve – innovation is key, develop new ways to improve and apply those improvements

Control – take control, correct policies in line with new systems, update SOP’s, bring budgets in line and redefine operational processes and management systems.

Conclusion

An organisation and its service quality and  performance will be judged by the customer. And only by continually adapting and striving to understand what the customers’ needs and expectations are, will an organisations reputation for high levels of service quality be achieved.

The methods used to adapt and change the organisation to a point where they deliver a high level of service quality are all focussed on continuous improvement, whether its Deming’s 14 points, PDCA, lean manufacturing, 6 Sigma, kaizen etc.  they are all focussed on the same thing.  The same core principles.  Find out what the customer wants and expects and align their  processes and supply methods  to meet those expectations in the most efficient and profitable manner possible.

However, none of that will be possible unless the organisation in question has the correct culture for growth and is led from the top down  by senior leaders with principles ad capabilities that can prepare the organisation for sustained growth and prosperity.  They must have a belief in the systems they are using and develop management structures to support the implementation of those  systems  on the front line.

A TQM Framework must be created in order to facilitate continuous improvement, and a set of Key Performance Indicators should be identified, along with core data, so that any improvements implemented can be measured

The processes that are to be the subject of the improvements must be chosen by a collaboration between the  management and staff who have experience in the areas of concern.  All staff that are involved must have the relevant training in the world of continuous improvement, understand its principles and be onboard with the workplace culture that supports these systems.

It is also vitally important that the organisations strive to keep the communications open with their customers, methods that collect information regarding the requirements must be implemented and maintained.

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